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Crude Palm Oil (CPO) prices have made a smart recovery over the last one month. Prior to this upmove, the CPO prices were on a sharp fall since February. The CPO futures contract price on the Bursa Malaysia Derivatives Exchange fell from its high of MYR3,335 per tonne in February to record a low of MYR2,550 in July. After a brief sideways move the prices have reversed sharply higher and is currently trading at MYR2,818 per tonne.
On the domestic front, the CPO futures contract on the Multi Commodity Exchange (MCX) fell from a high of ₹599.7 per 10 kg in January to record a low of ₹475.2 in the first week of August. The contract has surged about 13.5 per cent from this low and is currently trading at ₹539.3 per 10 kg.
OutlookThe sharp reversal in the last one month signals the end of the downtrend in the CPO prices that was in place since February. Also, the recent reversal from the low of MYR2,550 on the Malaysian futures contract and from ₹475.2 on the MCX-CPO contract has happened from a key 50 per cent Fibonacci retracement support level.
Resistance for the Malaysian CPO contract is at MYR2,850 which is likely to be tested in the near term. A strong break above it can take it higher to MYR2,880 initially. Further break above MYR2,880 will pave way for the next targets of MYR2,920 and MYR2,940.
On the domestic front, the MCX-CPO futures contract has a key support at ₹523. There is a strong likelihood of the current upmove extending to ₹552 – the 61.8 per cent Fibonacci retracement resistance level. Inability to break above this hurdle on the first test might trigger a pull-back move to ₹530 or even ₹520. But if the MCX-CPO futures contract manages to breach above ₹552 decisively, the possibility will increase for it to revisit ₹600 levels.
Traders with a medium-term perspective can go long. Stop-loss can be placed at ₹520 for the target of ₹580. Accumulate on dips at ₹530 and ₹525. Revise the stop-loss higher to ₹543 as soon as the contract moves up to ₹551.
Note: The recommendations are based on technical analysis and there is a risk of loss in trading.
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